11 Jun 2016

Subscriptions Are the Right Way to Charge for Software

Apple has decided to allow subscriptions for all categories of apps, rather than only certain categories like media apps [1].

Stranding

Subscriptions solve the problem of paying for an app and then being stuck with an old version of the app. For example, I paid more than ₹7000 for Lightroom, but I’m now stuck at 5.5, while the latest version is 6. This is dumb. All the more so when Google [2], Apple, Flickr and others give me the latest version of their photo apps forever, free. It’s backward that paying users are stuck on old versions of apps while free users get the latest version [3]. If anything, it should be the opposite.

Lightroom is not the only software that I ended up being stuck with an old version of. Another example is Acorn, at ₹2700.

It’s not just costly apps that have this problem. Moderately-priced apps like GoodReader and Twitter apps have also stranded me on older versions.

This means I don’t get UX improvements, new features or bug fixes. Or, importantly, fixes to security bugs.

When I pay a lot of money and end up being stuck with an old version of apps, I think twice before buying apps in the future.

Incentives

Subscriptions also incent developers to enhance the product for their existing users, while one-time purchases incent developers to focus on getting new customers, ignoring existing customers, because they’ve already paid. This is the wrong incentive.

Another wrong incentive with one-time payments is to ignore the existing app and build another app, hoping they’ll make more money from sales of the new app.

A third wrong incentive is to make snazzy new features to be able to charge for an upgrade, even if that’s not the best way to improve the product. Developers should build whatever they think is best for their users, without having that decision warped by, “Can we get more money from convincing users to upgrade?”

Wrong incentives apply to the user also, who tends to use what they’ve paid for, even if a better alternative is now available.

Subscriptions also send an immediate signal to developers if the quality of the app declines, because users will stop their subscriptions, while developers may not track the number of active users. Even if they did, money is a very clear signal and focuses minds on solving the problem.


Subscriptions solve all these problems. They are the right way to pay for apps. There may be a few exceptions where one-time purchase is better, but in most cases, if you’re paying for an app, it’s better for everyone involved to pay via a subscription.

If you’re worried that subscriptions are a way for developers to keep charging over and over again instead of once, developers can always charge less, as low as ₹10 per year [4]. Not per month, but per year. Surely that’s low enough to address any concerns about having to pay over and over again [5]. You’re paying differently, not more.

Of course, some developers can misuse subscriptions as an excuse to charge more, but buyers can always reject that by not subscribing to that app. Just as they can reject an overpriced one-time purchase by not buying that app. So, whether the price is high or low is orthogonal to whether it’s a subscription or a one-time purchase.

[1] They may still reject an app if they think that the app shouldn’t be using subscriptions, but it’s no longer a blanket rejection of entire categories of apps.

[2] Disclosure: I work for Google, but not on Photos.

[3] Upgrade pricing doesn’t help, because the problem isn’t that I want to pay less for an upgrade, but that I shouldn’t have to pay twice for the same app.

[4] On both the Android, iOS and Mac app stores.

[5] Unless a one-time purchase is priced at the lowest level, like ₹10 or 99 cents. In those cases, subscribing means paying more. App stores can solve that problem by setting the minimum subscription price to lower than the minimum one-time purchase price.

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